Egypt has reduced its main interest rates by a full percentage point as the lowest inflation in almost a decade allowed the central bank’s third consecutive reduction to spur investment without dimming the allure of the world’s best carry trade, reported Bloomberg.
In a statement, Central Bank of Egypt (CBE) said that the Monetary Policy Committee reduced the deposit rate to 12.25 per cent and the lending rate to 13.25 per cent. Goldman Sachs Group expects a pause in December, followed by a total of 150 basis points of easing next year.
The North African nation has been on a mission to bring inflation under control after prices were sent rocketing by a currency devaluation and subsidy cuts enacted to seal a $12 billion International Monetary Fund loan. The future of CBE’s easing cycle is now less clear, since inflation probably hit bottom for the year in October 2019, reaching an annual 3.1 per cent, a 10th of its level just two years ago.
The reduction could also help the Middle East’s fastest-growing economy with its goals of boosting private investment and slashing debt-servicing. The government said this week it targets 6.4 per cent growth in the 2020-2021 fiscal year. Finance Minister Mohamed Maait has said he’d like the private sector’s share of gross domestic product to rise to 70 per cent in the next five to seven years.